WASHINGTON, DC—Calling GSE reform “the last piece of unfinished business from the 2008 financial crisis,” the Mortgage
Bankers Association has released a white paper outlining its plan
for doing so. MBA’s proposal would bring much higher levels of
private capital into the secondary mortgage system, while preserving what works in the current system: namely, 30-year fixed
rate single-family mortgages, the TBA market and long-term
multifamily financing options.

The association’s view of GSE reform would replace the
implied government guarantee of Fannie Mae and Freddie Mac
with an explicit guarantee at the MBS level only, supported by a
newly instituted Mortgage Insurance Fund with appropriately
priced premiums. It would also bring an element of competition
into the picture with multiple guarantors that would compete on
operations and systems development, customer service, product
parameters and innovation, and pricing and execution.

Such a framework wouldn’t be erected overnight, and theMBA plan outlines the transition from the current system to itsend state. In phase one, among other measures, the MortgageInsurance Fund would be created and new entity structureswould be formed. Phase two would entail the implementationtransfer of GSE assets, the regulatory chartering of guarantorsand the winding-down of the GSEs. The government would sell itsinterests in the guarantors to private investors in phase three.

Titled “GSE Reform: Creating a Sustainable, More Vibrant,Secondary Mortgage Market,” the white paper “not only lays outa detailed end-state solution that will work for the residential andmultifamily markets, but also the transition steps to accomplishthis goal,” says Rodrigo Lopez, MBA’s chairman and executivechairman of NorthMarq Capital. “We look forward to workingwith Congress and the Administration to find a permanent, sus-tainable solution to the government’s role in housing financethat doesn’t repeat the mistakes that led to the crisis.”Both the new white paper and its predecessor, released this pastJanuary, derived from the work of MBA’s Task Force for a FutureSecondary Mortgage Market. The task force consisted of individualsfrom MBA member companies representing a broad cross-sectionof the residential and multifamily real estate sectors.—Paul Bubny

REGULATORY WATCH

How Risk Retention
Could Boost CMBS

CHICAGO—It’s been said that the risk-retention piece of CMBS securitizationsgoing forward will stymie the market for adebt instrument that’s already strugglingto cross the $100-billion barrier. Theargument is that the new rule, requiring aCMBS sponsor or qualified third party toretain 5% of a deal’s value on the books,“will restrict capital, drive up borrowingcosts, increase execution uncertaintyaround new originations and push smallerfinancial institutions out of the market.”That’s the pessimistic view of riskretention, which took effect this pastDecember as part of the Dodd-Frankregulatory regime. However, a new whitepaper from PGIM Real Estate Financemakes the case that not only is CMBSpoised for a new bloom of popularity,but that the risk-retention requirementwill help the cause, as well.

As the latest NCREIF Property Index
makes clear, equity appreciation has
been decelerating, a trend that means
“borrowers will likely look to take on
higher leverage levels to hit yield targets,” according to the PGIM REF white
paper, titled “Not So Risky Business:
Why Risk Retention-Regulations Are
Good for the CMBS Industry.” This

MBA Gets Specific on GSE Reform

CHICAGO—Bridge Development Partners
LLC recapitalized a portfolio of three
Chicago-area cold storage warehouse
properties to Investcorp International
Realty for an undisclosed amount. A mix
of third-party logistics firms and direct distributors of cold storage product lease

93% of the 715,000-square-foot portfolio.

Bridge has, in recent years, gotten veryinvolved in the cold-storage sector as adeveloper and owner. Its decision to retaina minority ownership of these assets andstay on as the property manager helps toillustrate an important factor in thebusiness. Bridge acquired, redevelopedand stabilized the three buildings in recentyears with separate joint venture partners.

JLL, CBRE and NAI Hiffman represented
Bridge in the transaction.

“Cold storage is such a niche market,
where everybody knows everybody,” says
Many industrial properties, especially distribution
facilities, are relatively
easy to construct and manage. But cold storage
buildings, which have
heavy machinery that
needs constant tending,
are “not as cookie-cutter
as a big box building.”

Further, “financial institutions are not
very comfortable with the product
because they don’t know much about it.”

The difficulty in financing new product helps make the sector very attractive
to investors. “Vacancy rates are extremely
low, and despite significant demand,
there is very little new product being
introduced.”—Brian J. Rogal

Institutions Getting Chill With Cold Storage

BEHIND THE DEAL

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